Bank Nifty outperforms Nifty: Will the run-up continue?

Stock market today, share market news: Along with Sensex and Nifty, Bank Nifty clinched a new all-time high of 47,588  in today’s session (December 11), taking the year-to-date (YTD) gains on the index to over 10 per cent.

Of the 12 constituents in the basket, three of the stocks, namely Punjab National Bank, Axis Bank, and HDFC Bank, have clocked gains of 10 per cent or more in a month.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said Bank Nifty has been outperforming NSE Nifty 50, which is a significant trend in the market. Last week, while Nifty gained 3.5 per cent, Bank Nifty gained up by 5.5 per cent. 

The expert expects the outperformance to continue given the fair valuations of banking stocks, particularly the leading names.

Avdhut Bagkar, Derivatives & Technical Analyst at Stoxbox, said the banking index is exhibiting a positive tilt for today, as 47600 CE (call options) and 47600 PE (put options) are showing a tight struggle, standing among the highest OI. Once the spot index stabilises over 47,600, traders may expect a sharp upside on Monday.

Among the highest open interest (OI), 47,500 PE, 47,400 PE, and 47300 PE are witnessing writing, implying support for the index. Thus, any downside move in the region of 47,500–47,400 should comprehend accumulation and a reversal cannot be neglected, added the expert.

Nifty Bank Outlook

“On the daily chart, the overall trend in the Bank Nifty remains highly optimistic. The current trend exhibits a sideways movement in the range of 47,300 to 46,500 levels, and any closing breakout of this rectangular range could trigger the next rally," said Bagkar.

"On the upside, the banking index may travel in the direction of 48,000, while a breach may lead to a dip towards the 45,800 level. The trend line breakout on the RSI favours bulls as the market demonstrates its ability to absorb sell-offs as it enters uncharted territories,” the expert added.

Furthermore, Kotak Securities in its report today said we keep our estimates for banks unchanged, given that the one-time impact of the wage hike on profitability is not material. Most banks have been reporting healthy return ratios recently. This has been driven primarily by improving asset quality, resulting in declining credit costs.

"We believe that this period of low credit cost is likely to continue for some more time, as we do not see any worrying signs of stress in either the retail, MSME or corporate segments so far," added the report.